The Philippines and Japan signed today, a JPY 253.31 billion loan agreement on the latter’s 2nd tranche funding for the construction of the Metro Manila Subway Project. 

Finance Secretary Carlos Dominguez III, on behalf of the Philippine government, and Mr. Eigo Azukizawa, the Chief Representative of the Japan International Cooperation Agency (JICA), signed the loan accord for the Philippines’ first-ever underground railway. 

Also present at the signing ceremony was Japan Ambassador to the Philippines Kazuhiko Koshikawa and Transportation Undersecretary for Railways Timothy John Batan.

Secretary Dominguez thanked the government and people of Japan for continuing to extend financial support for  the construction of the Metro Manila Subway, which is one of the flagship projects under President Duterte’s signature program “Build, Build, Build.”

The second tranche loan (about P112.87 billion or US$2.2 billion) extended by Japan for the project is payable in 27 years with a grace period of 13 years, for a total maturity period of 40 years. 

This loan agreement follows the earlier accord signed on March 16, 2018 between the Philippines and Japan for the subway project’s  1^st tranche loan of JPY 104.53 billion (about P47.58 billion or US$933.73 million), which also has a 40-year total maturity period. 

The National Economic and Development Authority (NEDA) Board chaired by the President approved the revised total project cost of P488.48 billion (approximately JPY1.08 trillion or US$9.58 billion)  for the Metro Manila Subway on Sept. 23 last year. 

JICA will finance 75.9 percent of the project through a time-sliced loan totaling P370.77 billion (about JPY804.46 billion or US$7.27 billion), while the Philippine government will fund the remaining 24.1 percent or P117.71 billion (about JPY273.66 billion or US$2.31 billion) 

Utilizing cutting-edge Japanese tunneling technology, the Metro Manila Subway involves the construction of a 27.5 kilometer (km) railway line from Valenzuela in Bulacan to Bicutan in Taguig City and the  NAIA Terminal 3 in Pasay City with a 33.1-km electromechanical system.  

The project would also cover the physical integration segment with the North-South Commuter Railway (NSCR) System (i.e., FTI to Bicutan). It also involves the construction of a depot and 17 stations (two of which will be constructed through a separate loan under the NSCR System), and the procurement of 30 train sets. 

For the remaining three to four tranches of the total loan, JICA will release the funds based on the project requirements and will be subject to further discussions between JICA and the Department of Transportation (DOTr), the project’s chief implementing agency. 

The preparation of the detailed engineering design and bidding documents for the project started in November 2017, financed by a grant from JICA.

In January 2018, the DOTr and JICA also signed a grant-financed technical cooperation agreement for the establishment of the DOTR Railway Office, which is intended to support capacity building for the operation and maintenance of both the Philippines’ current and new railway systems.

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Finance Secretary Carlos Dominguez III and India Ambassador to the Philippines Shambhu Kumaran met recently to explore ways of enhancing economic cooperation between their two countries, especially in the areas of “financial and digital technologies” and infrastructure development.

Both officials acknowledged the numerous mutually beneficial opportunities open to the Philippines and India as economic partners in the Indo-Pacific region, as both countries are poised to strongly bounce back in 2021 from the economic impact of the lingering COVID-19 pandemic.

During his virtual courtesy call on Secretary Dominguez, Ambassador Kumaran expressed India’s interest in strengthening its cooperation with the Philippines in the fields of banking and finance, particularly on expanding the use of fintech to help attain President Duterte’s goal of financial inclusion for all Filipinos.  

In support of this goal, Ambassador Kumaran said India can lend its expertise to the Philippines in setting up its national broadband network as well as its national ID system. 

Secretary Dominguez welcomed the Ambassador’s offer of assistance and invited Indian companies to participate in the upcoming rollout of a shared cyber-defense plan for Philippine state-run banks and their subsidiaries. 

The Finance Secretary also expressed his appreciation for India’s interest in helping the government implement its digital transformation programs that aim to expand financial inclusion among Filipinos, upgrade the delivery of frontline government services and further curb official corruption. 

During the virtual meeting, Ambassador Kumaran also said Indian companies are interested in taking part in the Duterte administration’s “Build, Build, Build” program but are in need of more information on the various opportunities available to them under the President’s centerpiece infrastructure modernization plan. 

To assist prospective investors on this concern, Secretary Dominguez and Ambassador Kumaran agreed to help organize a webinar or online workshop where the Philippines can showcase the various opportunities open to India’s companies on infrastructure development, as well as other possible areas of cooperation between Filipino and Indian firms. 

The Finance Secretary mentioned during the meeting that an Indian company—GMR Infrastructure Limited—is already taking part in the “Build, Build, Build” program and has performed impressively in operating the Mactan Cebu International Airport (MCIA) and expanding the Clark International Airport (CIA).

The Philippines and India rekindled their bilateral ties with the official visits of President Duterte to India in 2017 and 2018, which were followed by a state visit of Indian President Ram Nath Kovind to the Philippines in October 2019.

India and the Philippines celebrated  last year their 70 years of diplomatic relations, which were established  on November 16, 1949. 

The Bureau of Customs (BOC) increased its revenue collection from petroleum products in November 2020 by 54.1  percent to P12.83 billion, as against P8.33 billion in the same period last year as a result of the surge in imports of diesel and gasoline.  

In its report to Finance Secretary Carlos Dominguez III, the BOC said the increase in revenues was driven mainly by the corresponding spike in excise tax collections from petroleum products. 

From Nov. 1-30, the BOC said excise taxes collected by the Bureau from fuel imports amounted to P8.97 billion, which is 88.7 percent higher than last year’s collection of P4.76 billion for the same period. 

For the period of Nov. 1-30, fuel imports increased by 32.1  percent to 1.1 billion kilograms (kg), compared to 829.4 million kg brought into the country in the same period in 2019, the BOC said. 

Crude oil importation was only  381.8 million kg during this period, which is a 51.8  percent drop compared to the 792.7 million kg that was imported last year, the BOC said during a  recent Department of Finance (DOF) Executive Committee (Execom) meeting. 

 Pilipinas Shell Petroleum Corp. shut down its refinery in Batangas last August and announced it will convert  the site into an import terminal. 

Oil refiners in Asia, North America and Europe have also permanently shut down their facilities following the decline in global fuel demand by 30 percent amid the global economic slump resulting from the COVID-19 pandemic.  

During the Nov. 1-30 period, the volume of  diesel imports amounted to 698.8 million kg, up by 60 percent from the 436.9 million kg imported during the same period last year. 

The volume of gasoline imports also increased by 55.7 percent to 259.2 million kg during the same period, up from 166.4 million kg last year, BOC data show. 

Imports of  kerosene and other oil products grew 354.4 percent from 1.28 million kg in the month of November 2019  to 5.8 million kg during the same period this year. 

Expectedly, jet fuel imports decreased 71 percent to 14.6  million kg during the November 1-30 period, from 50.2 million kg last year, in light of the  pandemic-related international travel restrictions.

During the Execom meeting, the BOC also reported to Dominguez  that for the period Jan.1 to Nov. 30, preliminary data show the BOC posted a total collection of P493.32 billion, which   exceeded by 6.6 percent the revised target of P462.78 billion set by the Development Budget Coordination Committee (DBCC). 

Revenue growth from fuel imports from Jan. 1 to Nov.30 showed a 1.6 percent increase—P133.4 billion from P131.4 billion collected in the same period in 2019. 

The increase in excise tax collections by 25.8 percent from P72.9 billion last year to P91.7 billion accounted for the growth in revenues despite the drop in the volume of fuel imports from 12.7 million kg in 2019 to 11.67 million kg this year, the BOC said. 

As a result of the drop in global demand, the value of fuel imports also declined by 34.4 percent. 

The value of fuel imports from Jan. 1 to Nov. 30 was recorded at P250.52 billion, down from P381.97 billion during the same period in 2019. 

By Monsi A. Serrano

Japan has been on the top in providing financial assistance to the Philippines. During the height of COVID19 pandemic, the Philippines has become the 1st recipient of emergency COVID-19 support loan.

Havibg said this, the relationship of the Philippines and Japan remain strong, and just recently, both countries have reaffirmed their commitment to further build on their strong economic partnership, which includes plans to expand Japanese investments in the country following favorable developments on a Philippine tax reform measure that aims to significantly lower the corporate income tax (CIT) rate.  

Newly designated Japan Ambassador to the Philippines Koshikawa Kazuhiko said during a recent courtesy call on Finance Secretary Carlos Dominguez III that Japanese companies are exploring ways of realigning their supply chains to other countries like the Philippines. 

Ambassador Koshikawa said the approval by the Senate of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, earlier passed by the House of Representatives, was welcomed by Japanese investors doing business in the Philippines, as it will soon end the unpredictability on the future tax and incentives scheme of the country.

The Senate measure aims to lower the CIT for micro, small, and medium enterprises  (MSMEs) with a net taxable income of P5 million and below to 20 percent, while other companies, including foreign firms, will pay a harmonized rate of 25 percent. 

The current CIT, which is the region’s highest, is 30 percent.

Ambassador Koshikawa congratulated Secretary Dominguez on the Senate passage of the CREATE bill and expressed the hope that Congress would give its final nod to the measure so that President Duterte could soon sign it into law. 

When the Congress resumes session next year after its yearend break, a bicameral conference committee composed of representatives from both chambers will hammer out a consolidated version of the CREATE bill for submission to the President for his approval.

Secretary Dominguez informed the Ambassador that aside from the CIT rate cut, CREATE will also allow the government to tailor fit incentives given to businesses so as to attract the kind of investors that it wants to invest in the Philippines.

Secretary Dominguez told Ambassador Koshikawa the Philippines’ competitive edge in attracting foreign direct investments (FDIs) is its young working population, which complements Japan’s highly skilled labor force and makes the two countries ideal “demographic partners.”

During the meeting, Ambassador Koshikawa also commended the Philippine economic team led by Secretary Dominguez for its sound fiscal management of the economy amid the COVID-19 pandemic.  

He also restated Japan’s continuing support for the Philippine government’s efforts to curb the spread of the virus and recover from the economic repercussions of the crisis. 

Citing the signing in September between the two countries of the 50-billion yen Post-Disaster Standby Loan (PDSL) Phase 2, the Ambassador reaffirmed Japan’s commitment to continue assisting the Philippines in its disaster risk reduction and mitigation programs.  

In response, Secretary Dominguez said the Philippines has looked to Japan as a good example of how to curb the spread of COVID-19. 

He again thanked Japan for responding swiftly to the government’s call for emergency financing to help mitigate the impact of the pandemic on the economy and the Filipino people. 

Secretary Dominguez also thanked Japan for its support to the Philippines’ development agenda under the Duterte administration, citing its status as the country’s no.1 official development assistance (ODA) partner, with loans and grants amounting to around US$10.10 billion (38.53 percent of total ODA) as of June 2020.

Since the start of the Duterte administration in July 2016, 15 loan agreements totaling JPY679.296 billion (about P313.147 billion or  US$6.443 billion) have been signed by Manila with Tokyo.

During the meeting, Ambassador Koshikawa likewise congratulated the Philippines on its recent successful issuance of US$2.75 billion global bonds, which included the Japan-based Daiwa Capital Markets as among the joint bookrunners of the offering.

The Ambassador also reiterated Japan’s long-term support for the economic development of, and the peace process in, Mindanao.

During the meeting, Secretary Dominguez briefed Ambassador Koshikawa on the progress of the implementation of the Bangsamoro Organic Law (BOL) and the strides made by the National Government-Bangsamoro Government Intergovernmental Relations Body (IGRB). Secretary Dominguez co-chairs the IGRB with Education Minister Mohagher Iqbal of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). 

Before beginning his tour of duty in Manila, Ambassador Koshikawa was a senior official at the Japan International Cooperation Agency (JICA), and had served as Japan’s Ambassador to Spain and Angola. 

Ambassador Koshikawa presented his credentials to President Duterte as Ambassador Extraordinary and Plenipotentiary of Japan to the Republic of the Philippines last December 14.

According to the Ambassador, his first official activity after presenting his credentials was his courtesy call on Secretary Dominguez.  

Finance Secretary Carlos Dominguez III said the unprecedented challenge brought by the COVID-19 pandemic has underscored the importance of “greater solidarity and stronger collaboration among nations” for the world to overcome this crisis and return to the path of strong global growth. 

Secretary Dominguez highlighted the need for all countries to fight a “shared battle” against COVID-19 in his letter to Qatari Ambassador to the Philippines Ali Ibrahim Al-Malki. 

In his letter, the Finance Secretary congratulated the State of Qatar on the occasion of its National Day on December 18, which also commemorates the State’s founder, Sheikh Jassem bin Mohammed Al Thani. 

“On behalf of the Department of Finance (DOF), I extend my warm congratulations to the government and the people of the State of Qatar on the occasion of the country’s National Day. It is our wish that your country continues to progress and face prosperity in the years to come,” Secretary Dominguez said in his letter. 

Secretary Dominguez said the Dec. 18 event celebrates how Sheikh Jassem had succeeded over many trials and difficulties in laying the foundations of Qatar’s modern state by uniting its people–just as all nations should likewise aspire for stronger collaboration and solidary to prevail over the coronavirus-induced global crisis. 

“In these uncertain times, the commemoration of the State of Qatar’s Founder, His Highness Sheikh Jassem bin Mohammed Al Thani, is a vibrant reminder of the triumph of unity over adversity,” Secretary Dominguez said. 

As the Philippines “strives to win back its growth momentum” and “build back the best possible future for the Filipino people,” Secretary Dominguez said Qatar’s National Day brings “hope and inspiration” as it also honors Sheikh Jassem’s tremendous efforts in launching a modern and prosperous Qatar under his governance. 

“As we begin this difficult task of rebuilding our domestic economy, we look forward to a strengthened partnership and enhanced collaboration with Qatar,” Secretary Dominguez said. 

Ensuring efficiency. seamless and on time, the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) have put their respective digital transformation programs on the fast lane this year even amid the COVID-19 pandemic to further improve tax administration for the benefit of taxpayers and raise the collection efficiency of these agencies. 

In separate reports to Finance Secretary Carlos Dominguez III during a recent executive committee (Execom) meeting of the Department of Finance (DOF), the BIR and BOC said that since February this year,  they have implemented various digital tools to facilitate trade, make the filing and payment of taxes and duties easier and more convenient for taxpayers, and curb corruption.

Starting Feb. 14, the BIR has allowed the use of the PayMaya mobile application as an additional electronic payment channel for tax payments.  

The BOC followed suit on June 9 by partnering with the Bureau of the Treasury (BTr) and the Development Bank of the Philippines (DBP) to allow  the collection of customs duties and fees through the PayMaya digital channel. 

The BIR has also improved  the tax forms deployed in the e-BIR Forms System to make the filing of tax returns more accessible and convenient to taxpayers. 

The preliminary number of tax returns filed electronically from January to September 2020 reached 16.45 million, making up 94 percent of the total 17.42 million tax returns filed for the period.

From January to September 2020, P1.241 trillion or 86 percent of total BIR tax collections amounting to P1.45 trillion was collected through electronic payment channels. 

Of this amount, P3.3 billion was collected from the additional electronic payment channels tapped by the BIR  under the Duterte  administration. 

On top of PayMaya, these other e-payment tools are GCash, LandBank Linkbiz, DBP PayTax, Union Bank Online and PESONet.

The BIR began the pilot implementation  last April 21 of its web-based Internal Revenue Integrated System (IRIS) that will be the central tool and repository to process taxpayers’ information.  

This IRIS is targeted be available nationwide by the end of 2021, the BIR said. 

An Electronic Audited Financial System (eAFS) was launched last June 1 to allow business taxpayers to electronically submit  their financial statements to the BIR. 

The BIR also concluded last June its competition dubbed the ‘HACK-A-TAX Challenge,’ which  brought together talented information technology (IT)  professionals, start-ups and students across the country to develop innovative digital-based solutions for the bureau.

To enable  taxpayers to continue consulting revenue officials on their tax-related concerns even with the mobility restrictions imposed to curb the spread of COVID-19, the BIR launched its eAppointment Facility on Oct. 19. 

This November, the BIR also launched its web-based Procurement, Payment, Inventory and Monitoring System (PPIMS) and its Online Application for Tax Clearance for Bidding Purposes (eTCBP). 

The bureau also expects to launch this month its in-house developed One-Time Transactions (ONETT) Tracking System and its Taxpayer Identification Number (TIN) Verifier mobile application  for taxpayers. 

For the BOC, it has continued to simplify its processes by launching its Customer Care Portal System, which enables stakeholders to electronically lodge and track the status of their inquiries, requests and concerns. 

Last Feb. 7, the BOC  also unveiled  its Customs Service Center, which functions as a centralized document-receiving and -releasing area, information kiosk, and payment booth.

 The goal is to establish these centers in all BOC collection districts nationwide. 

To date, Customs Service Centers have been established in 13 major ports.

The BOC has also rolled out its Electronic  Tracking of Containerized Cargo System (e-TRACC) that allows for the real-time monitoring of inland movements of containerized cargo using a GPS-enabled tracking device to secure the transport of shipments to their intended destinations. 

It has also put in place an Inventory Management System (IMS) that monitors the real-time status of imported goods and raw materials transferred, stored and withdrawn from customs bonded warehouses to foil attempts at technical smuggling. 

An Electronic Value Reference Information System (e-VRIS) is also being used now by the BOC as a risk management tool that operates its  Electronic 2 Mobile (E2M) System to ascertain the veracity of any statement, document, or declaration presented for customs valuation purposes. 

Its E2M system undergoes regular maintenance updates to ensure its  stability and optimum performance. 

By Victoria “NIKE” De Dios

The Korean government has proven its sincere commitment to the Philippines and Filipinos in practically all the endeavors that would help our country rebound in this time of coronavirus pandemic.

Finance Secretary Carlos Dominguez III cherished the efforts of the government of Korea for its swift assistance to the Philippines in its COVID-19 response efforts as well as for increased fund support to the Duterte administration’s “Build, Build, Build” program and initiatives to reform the country’s tax system.

Secretary Dominguez also expressed his appreciation for South Korea’s plan to further expand its investments in the Philippines and step up the pace of the negotiations on the proposed Philippines-Korea Free Trade Agreement (FTA), during a recent lunch meeting with Korean Ambassador to the Philippines Han Dong-man.

On top of providing a US$50-million loan to the Philippines-Korea Project Preparation Facility (PK-PPF) to help bridge operational gaps in implementing projects under the “Build, Build, Build” Program, Korea has also expressed its willingness to extend funding support to the Panay-Guimaras-Negros Bridge Project in Western Visayas, Secretary Dominguez said.

Korea also signed an agreement for a US$100-million loan for the Philippines’ COVID-19 Emergency Response Program last October 29 and has extended its expertise and assistance in setting up an electronic invoicing system in the Bureau of Internal Revenue (BIR) to improve tax administration.

During the meeting, Secretary Dominguez assured Ambassador Han that the Philippine government is intent on advancing the processing of loans and grants with Korea in the pipeline, such as a possible additional loan for COVID-19 response and financing support for projects on maritime safety, a water resources management information system, agricultural modernization and forest management.

Secretary Dominguez also sought Korea’s support in establishing a framework agreement that will provide a basis to process tied financing intended for the procurement of military equipment for the Department of National Defense (DND).

Ambassador Han, for his part, said Korea is always ready to assist the Philippines in implementing its development agenda and in extending support during emergencies such as the COVID-19 outbreak, given the strong ties and enduring friendship between the two countries.

These strong ties have been cemented by the sacrifices made by Filipino soldiers during the Korean War, which marks its 70^th anniversary this year, Ambassador Han said.

During the meeting, the Ambassador also said Korea is planning to expand business opportunities in the Philippines, but he has expressed concern over the country’s high corporate income tax (CIT) rate of 30 percent.

He welcomed Secretary Dominguez’s clarification on the proposed CIT reduction under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, which seeks to provide an outright tax cut of 5 percentage points from the current 30 percent tax rate to 25 percent starting this year, and an additional 1 percent reduction every year until the rate goes down to 20 percent.

The Ambassador said a possible investment opportunity that the two countries can explore is the manufacture of environment-friendly vehicles, considering that the Philippines is one of the world’s biggest producers of nickel, which is a key component in making electric car batteries.

Korea and the Philippines are also in the final stages of negotiations on an FTA, which will further expand trade and investment opportunities between the two countries, Ambassador Han said.

Secretary Dominguez said the Philippines is 100-percent behind this FTA as he underscored the Philippines’ strategic location in expanding Korea’s trade footprint in the US$2.6-trillion ASEAN (Association of Southeast Asian Nations) market.

Korea is the country’s 5th largest provider of Official Development Assistance (ODA), with loan and grant commitments amounting to around US$679.65 million or 2.59 percent of the country’s total ODA portfolio as of June 2020.

Through the Korea Export-Import Bank- Economic Development Cooperation Fund (KEXIM-EDCF), Korea has likewise committed ODA loans to the Philippines in the amount of US$631.77 million.

Korea is the 9^th largest provider of ODA grants to the Philippines, with a total of US$ 47.88 million as of June this year.

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There is no stopping the European Union’s generosity as it has committed an additional 150 million euros worth of grants to the Philippines, of which two-thirds will help finance programs to boost agricultural productivity in Mindanao and provide electricity to its far-flung small island-communities.

Last July 16, the Philippines and the European Union exchange the signed financing agreements for the EUR 35.5 million (P2 billion) grant for the Mindanao Peace and Development Program (RISE Mindanao) and the EUR25 million (P1.4 billion) grant for the Support to Bangsamoro Transition Program (SUBATRA).

The EU grant for the SUBATRA program will finance capacity-building initiatives for all three branches of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) government as well as the civil society organizations in the autonomous region. The RISE Mindanao, on the other hand, aims to unlock the productive capacities of Mindanao’s agriculture sector and expand economic opportunities for its farmers and small entrepreneurs while supporting the government’s priority of promoting growth in agricultural value chains.

Mr. Thomas Wiersing, the charge d’affaires of the EU Delegation to the Philippines, made this commitment during a recent virtual meeting with Finance Secretary Carlos Dominguez III to discuss the progress of the development cooperation between the Philippines and the EU.

As of August this year, the EU has extended a total of EUR85 million-worth of grants for the government’s peace and development initiatives in Mindanao.

During the meeting, Mr. Wiersing also reaffirmed the EU’s intention to reorient portions of its grants to the Philippine government’s COVID-19 response efforts in Mindanao, the DOF said.

Mr Wiersing also restated the EU’s continuing assistance to institute reforms in the Philippines’ justice system through the second phase of the Justice Sector Reform Programme: Governance in Justice (GOJUST 2).

On behalf of the Philippine government, Secretary Dominguez thanked the EU for continuing to support the Duterte administration’s peace- and confidence-building initiatives as well as for its assistance in boosting trade and agricultural productivity in Mindanao.

Secretary Dominguez also expressed his appreciation for the EU’s plan to reorient portions of its grants to Mindanao’s pandemic response efforts and its intention to provide support to cash-strapped local government units (LGUs) in the South.

He likewise welcomed the EU’s plan to provide grants for the electrification of Mindanao’s small island-communities and suggested the use of clean energy to implement this project.

Mr. Christoph Wagner, the new head of cooperation of the EU Delegation, welcomed the importance placed by Secretary Dominguez on the issue of the climate crisis with his clean energy recommendation for Mindanao’s rural electrification.

During the same meeting, Secretary Dominguez sought the EU’s expertise and assistance in accelerating the competitiveness of the Philippines’ manufacturing sector, given its weaknesses as a result of the country’s sudden jump from agriculture- to a services-based economy.

Secretary Dominguez said the EU, with its large manufacturing base, can share its technical expertise or extend assistance in providing the necessary equipment to help integrate medium-sized enterprises in the supply chain of big companies.

Strengthening and incentivizing the manufacturing sector will help the Philippines sustain its recovery from the pandemic, Secretary Dominguez said.

Secretary Dominguez also broached the possibility for the EU to assist the Duterte administration in its efforts to provide individual land titles to agrarian reform beneficiaries (ARBs), especially in Mindanao, so they could have property rights and access to credit facilities and other forms of financial support.

By Alithea De Jesus

As many people are engaging in agri-business across the country, the issue of recovery, payment and efficiency have become the main issues of the farmers especially in the time of the pandemic.

Seeing these challenges, Finance Secretary Carlos Dominguez III has called on the rural banking sector to play a proactive role in transforming Philippine agriculture into a modern, high-growth sector that will help provide the economy with a strong base to launch a quick recovery from the impact of the COVID-19 pandemic.

Dominguez said a robust rural banking system is necessary to provide financing support to investments in farm and logistical systems and other initiatives that will modernize Philippine agriculture.

Fast-tracking the modernization of the agriculture sector will enhance the food and nutrition security of Filipinos, boost rural incomes, and help power the recovery of the economy from the COVID-19 crisis, Dominguez said.

“We need to invest in our farm and logistical systems as quickly as possible. Demand for food is inelastic. By building modern agriculture, we can expand market access for food producers while keeping food supply available and prices affordable,” said Dominguez in his pre-recorded video message to participants at the virtual symposium organized by the Rural Bankers’ Association of the Philippines (RBAP) to mark its 63^rd charter anniversary.

“All these will require financing support that our rural bankers are best poised to deliver. I ask our rural bankers to play a proactive role in this area,”  he added.

Having overseen the rehabilitation of rural banks in the past, Dominguez said he is certain that the rural banking sector “is capable of remarkable turnarounds.”

Dominguez, who had served as an agriculture secretary during the administration of the late President Corazon Aquino, commended rural banks for performing their tasks in keeping the agriculture sector afloat during the coronavirus-induced crisis.

He said programs have been set in place under the Bayanihan To Recover As One Act (Bayanihan 2) to encourage investments in the agriculture sector and expand the capacity of rural banks to extend credit to more borrowers, Dominguez said.

These include increasing the capital of government financial institutions (GFIs) to enable them to serve as wholesale banks and rediscounting agents for small and medium-sized banks and microfinance institutions, which rural banks can tap to increase their lending capacity.

Dominguez said President Duterte has also certified the Financial Institutions Strategic Transfer Act (FIST) bill as an urgent measure to allow banks to dispose of non-performing loans and assets through asset management companies so that they can provide more credit to more sectors in need.

“With a robust rural banking system, we can transform Philippine agriculture into a dynamic, high-growth sector. Together, we can build a stronger, more resilient and inclusive national economy,” Dominguez said.

He noted that when the rest of the economy contracted as a result of the lockdowns imposed by the national and local governments last summer to save lives and protect communities from the pandemic, the agriculture sector even grew in the second quarter.

Data from the Philippine Statistics Authority (PSA) show that among the major economic sectors, only agriculture registered growth in the second quarter at 1.6 percent. Industry and services shrank by 22.9 percent and 15.8 percent, respectively.

Dominguez said agriculture’s growth amid the pandemic was not accidental, given that over the past four years, the Duterte administration has introduced game-changing reforms that boosted productivity and enhanced this sector’s resiliency.

The passage and implementation of the Rice Tariffication Law (RTL), for one, enabled the government to establish the Rice Competitiveness Enhancement Fund (RCEF) that aims to improve the efficiency of rice lands and encourage agriculture-related manufacturing to flourish, he said.

Under Republic Act (RA) No. 11203 or the RTL, the P10 billion earmarked yearly for the RCEF is sourced from the collection of tariffs on rice imports by private traders.

The RCEF is used to finance programs that will sharpen the competitiveness of palay growers by way of providing them access to farm machinery and equipment, high-yield seeds, cheap credit and skills training programs on farm mechanization and modern farming techniques.

The annual tariff revenues in excess of P10 billion shall be earmarked by the Congress–and included in the national budget of the following year–for financial assistance to palay farmers, titling of agricultural lands, an expanded crop insurance program on rice, and crop diversification.

By Alithea De Jesus

In the midst of criticism from people on the alleged mismanagement of fund and priorities on allocation, Finance Secretary Carlos Dominguez III has assured lawmakers that President Duterte’s economic team will maintain full transparency and exercise sound management of the government’s fiscal resources in meeting the challenges posed by the coronavirus-induced global health crisis.

For her part, Deputy Speaker Loren Legarda commended the economic managers led by Dominguez for this assurance as she expressed her support for the government’s post-pandemic recovery program anchored on the proposed 2021 national budget of P4.5 trillion now pending in the Congress.

“I honestly think that during these times of crisis, having an economic team such as this, especially with Secretary Dominguez, I think we’re in safe hands so to speak,” Legarda said during the recent briefing of the Development Budget Coordination Committee (DBCC) on the President’s 2021 National Expenditure Program (NEP) for the House appropriations committee.

“I’ve worked with him (Dominguez) for the past three years. And thank you for your transparency in even itemizing the fiscal risks and even acknowledging, in fact, that we would have to engage in debt,” added Legarda, who had chaired the Senate finance committee in the previous Congress.

The Senate finance committee is in charge of all matters relating to public expenditures, such as the funds for the spending of the national government and for the payment of public indebtedness; auditing of accounts and expenditures of the National Government (NG); claims against the government; and inter-governmental revenue sharing.

In response to Legarda’s query on the fiscal risks considered in preparing the 2021 national budget, Dominguez said that the biggest policy change that the economic team had to implement was to go over its original budget deficit target of 3.2 percent in order to be flexible in mobilizing fiscal resources for the government’s COVID-19 response efforts.

Dominguez said the government expects a higher deficit-to-GDP (gross domestic product) ratio for 2020 that it aims to keep below or at the median of the levels of its peers in the Association of Southeast Asian Nations (ASEAN) region.

For this year, the economic team projects a ceiling on the deficit-to-GDP ratio at 9.6 percent, which will go down to 8.5 percent in 2021 and 7.2 percent in 2022.

“So for 2020, 2021, and 2022, we have suspended the hard target deficit that we had from 2016 to 2019,” Dominguez said during the DBCC briefing.

Dominguez made it clear that despite breaching the deficit, the government will remain prudent in managing its financial resources, given that the COVID-19 pandemic would require “fiscal stamina” to ensure that the economy would be able to recover quickly from the global pandemic.

The government also needs to be prudent in its borrowings to ensure that future generations, which will have to pay for them, would not be burdened with massive public debt as what had happened in the past, Dominguez said.

He said the government has been “very transparent” with the amount of loans and grants it has secured to support public expenditures in the face of the significant drop in revenues as a result of the pandemic-induced global economic slump.

In his presentation before the House appropriations committee chaired by ACT-CIS Partylist Rep. Eric Yap, Dominguez said that as of the end of August, the Department of Finance (DOF) secured a total of US$8.83 billion in financing for the government’s COVID-19 response efforts from the Philippines’ development partners and the commercial markets. As of September 23, the amount of financing support for COVID-19 from external sources had risen to US$9.9 billion.

Details of these financing agreements are uploaded on the DOF website.

Dominguez said total borrowings for 2020 and 2021 are projected to reach P3 trillion to support priority expenditures necessary for the country’s swift recovery from the COVID-19 crisis and aggressive public investments in infrastructure and social services.

Borrowings are expected to settle at P2.3 trillion in 2022, he said. These borrowings will still be predominantly sourced domestically, he said.

The debt-to-GDP ratio is projected to settle at 54 percent this year and go up to 58 percent in 2021, and 60 percent in 2022.

These projections are still lower when compared to the country’s all-time high debt level of 71.6 percent of GDP in 2004, Dominguez noted.

“So we have mentioned the amount of funds that we have borrowed for the first 8 months of this year. And we have also disclosed that we are borrowing around P3 trillion for each of the next 2 years, for 2021 and 2022,” Dominguez said.

“These are the major fiscal risks that we have disclosed and these are the major fiscal risks that we are managing,” he added.